IT recession is no more, says study

Growth in 2010

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We're coming into the home stretch of 2009, and this is the time when the IT prognosticators come out of the woodwork to make their predictions and projections for the new year. The wizards at Computer Economics - which makes a business out of measuring IT spending, salaries, and other technology trends - is calling an end to the IT recession that has been underway since early 2008. In North America, at least.

In its latest framing of the IT spending picture, a report called the Outlook for IT Spending and Staffing in 2010, Computer Economics extrapolates from a survey of 139 companies located in the United States and Canada to project IT spending for North America at large. (Yes, El Reg, just like you and Computer Economics itself, would all like a much larger sample).

Based on the survey responses and some spreadsheet work, the market researcher says that IT spending was, on average, flat in North America in 2009 and that IT managers are expecting to boost their budgets by 2 per cent next year.

That is not as good as the growth the IT sector in North America saw after pulling out of the last IT recession, which hit in 2001 in the wake of the dot-com, Y2K, and ERP bubbles. IT spending was in negative territory in 2002 and 2003 and pulled itself back to flatline in 2004. According to Computer Economics, IT spending in North America rose by 2.5 per cent in 2005, continued to grow by 4.1 per cent in 2006, and 5 per cent in 2007. (Whoopie!, but that was still a lot less than during the boom years at the end of the 1990s).

Because the US economy went into recession in December 2007, eventually dragging down the rest of the world as the mortgage and banking crises raged in 2008, IT spending dipped a bit, to a 4 per cent growth rate. Considering the mess the US economy was in, flatlining again in 2009 and rebounding a bit in 2010 seems easy compared to the last IT recession. After learning from the dot-com bubble, companies have been more careful about buying capacity they really don't need.

"Based on our twenty years of tracking IT budgets, all signs point to a recovery year," said Frank Scavo, president of Computer Economics, in a statement accompanying the IT spending projections. "IT executives are prepared to make mid-year adjustments, up or down, based on the strength of the recovery, but right now we it appears we see a year of stabilization in IT spending and staffing."

Drilling down a little bit into the forecast, Computer Economics found that 52 per cent of those polled expected that they would boost their IT budgets in 2010, 16 per cent expected to make cuts, and 32 per cent said they would stay the same. A year ago, when we were in the grips of the economic meltdown, Computer Economics asked the same question about expectations for 2009 and 35 per cent of survey respondents said they were cutting budgets, 54 percent were holding pat, and only 11 percent were increasing their IT spending in 2009.

Incidentally, the company's spreadsheet jockeys say that in two decades of watching IT spending, whenever half or less of the companies polled say they are going to increase spending, you are entering an IT recession, and when the number breaks above 50 per cent, you are coming out of it.

On the personnel front, only 7 per cent of those polled said they would make staff layoffs in 2010, and 39 per cent were optimistic that they would add people in the coming year. That leaves 54 percent of IT shops keeping their staffing levels the same. ®